Social lender Quakle goes bust

Poor credit assessment blamed for demise of short-lived company, which aimed to give savers better than average returns.

Social lending website Quakle has gone bust, it has emerged, just over a year after launching. The site, one of a number of such sites, also referred to as peer-to-peer lenders, closed to new business in April.

It has now sent emails to customers advising them of its closure.

As we explained in detail in this article, social lenders offer people the opportunity to lend money to borrowers at an interest rate agreed by the person lending. They can potentially offer better returns on your savings than conventional savings accounts.

The three biggest names in this market are Zopa, Ratesetter and Funding Circle. These three companies have also set up a trade body called the P2P Finance Association, which aims to set minimum standards of protection for social lending customers.

It’s estimated that £192 million has been lent via these websites over the past 18 months.

However, none of these companies are part of the Financial Services Compensation Scheme, which protects up to £85,000 of deposits if a company fails.

Quakle was not a member of the P2P Finance Association.

How Quakle came a cropper

Following the news of Quakle’s demise, Giles Andrews, CEO of Zopa and Chairman of the P2P Finance Association, said: “Quakle choose to ignore all of the available personal and business credit information, and instead apparently used customers’ social media profile and rankings to determine the risk they posed. 

“As we believe most of the Quakle loans defaulted, clearly this was a big mistake. As the amount of money involved was quite small, we would hope that Quakle and its backers have repaid the money their lenders have lost.”

It’s believed that customers only lent around £16,000 via the site before its demise.

Quakle have not responded to our requests for comment on this story.

The Association says its three members use “fit and proper credit risk assessment processes” to assess borrowers. And it is working with the Government on regulation for the industry.

The Office of Fair Trading says it is monitoring developments in the social lending industry.

More: How social lending works | Savings options that beat inflation